Power And Dollar

Hurricanes, P&C Insurance and Property Taxes

Most natural disasters have short time durations with a long recovery period, like Katrina and Tsunami.  What we have now is something different:  climate change gives us a long disaster duration with a long recovery period.  Climate change gives us multiple disasters over a long period of time.  

 

What companies get affected by storms and hurricanes? Property insurance companies.  All state governments want to regulate property insurance heavily because this retail financial product touches a lot of voters.  State governments’ interest in this industry is actually pricing.  If the pricing is heavily regulated, then it is the expense that the companies have to control in order to make profit.  The biggest expense for property and casualty insurance companies is the managing the claims.  Big property insurance companies are AllState (NYSE: ALL), Travellers (NYSE: TRV), Progressive (NYSE PGR), ACE (NYSE: AEX).

 

For that reason, P&C insurance companies actually have more incentive in participating climate mitigation financial instruments than big financial houses like Merrill or Goldman.  As well, they have more at stake simply because they have less control over their revenue and absolutely no control over their payout.  Finding a climate change solution is more important to them than to many other industries.  The work around solution is to avoid the a high payout area.  But in the age of climate change, which place is not affected?  It is only a question of which natural disaster, be it drought, flood, hurricane, wild fires…

 

Another aspect of climate change is on infrastructure.  More and more infrastructure will require more repairs.  This will be a financial burden on local governments, which translates to state income tax and property tax.   

 

However the solution is global, not local.  This is where the political risk is.  Risk mitigation rests among national governments.  However, little is done.  Financial burden is placed on consumers and local governments.  However, they have very tools available to them.  Since financial impact is placed at a local level, that is why it is hardly a national election topic when it is actually a topic of heavy financial substance.

 

Increasing population density is one tool available since it minimizes the exposure to infrastructure.  Zoning is only one way to make it happen.  Property tax is another way.  In fact, a more effective way.  Change the composition of tax between property and land will create more incentive for building higher density areas.  Decrease the proportion of tax on property and increase the proportion of tax on land will naturally encourage builders to create high density communities.  

 

 

 

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August 18, 2008 - Posted by | Current Events, Democrats, economics, election, Election 2008, environment, nonprofits, politics, wordpress-political-blogs

3 Comments »

  1. […] the rest of this great post here […]

    Pingback by Insurance Blog » Hurricanes, P&C Insurance and Property Taxes | August 18, 2008 | Reply

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    Pingback by Land Site » Blog Archive » First duty of Government is- To protect the country and people | August 18, 2008 | Reply

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